Insight: The Intellectual Property (IP) dimension of Technology Transfer

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In this insight, EBTC's Head of IPR, Mr. Arvind Chopra gives his view on the IPR angle with respect to technology transfer.

 

Technology transfer is the process of transferring technical knowledge and skills from one organization to another. The process of technology transfer includes multiple variables such as process, design, technology, information, know-how, technical and legal framework knowledge. Each of these variables may further include sub-atomic variables. To illustrate, technology as a variable may further depend upon technological complexity, adoption, adaptation, availability of skilled manpower, and localization. No doubt, with such a large number of variables, it becomes extremely important to identify and isolate critical variables that are of immediate importance to propel technology transfer to its logical end. Inter-geographical technology transfers are even more complex to manage since they involve cross-cultural issues apart from other variables. Additional issues arising in inter-country technology transfer are taxation, intellectual property, tariff and non-tariff barriers, standards, regional and bi-lateral treaties, and market access. To summarize, technology transfer is a complex process involving multiple variables, which are difficult to manage collectively.

Over the years, technological development has incubated a large number of technologies, which remained either under-utilized or were not commercialized. Furthermore, new research models and innovation methodologies has revolutionized research and development activity across the world. An example of recent development in innovation methodology is the use of open innovation models by organizations around the world. The open innovation model allows inventors and researchers to capture various innovations in course of their research even though some of these (offline innovations) have no relation with the ultimate research objectives. Licensing/commercializing these offline innovations allows organizations to fund additional research or create revenue streams for themselves. While licensing offline innovations to potential buyer organizations can use different models and/or strategies to maintain a continuous revenue stream, it is important to protect the intellectual assets created around main research objectives by specific intellectual property instruments to reap the benefits of the offline innovations.

Organizations no longer consider their Intellectual property (IP) offices as cost centers. Instead, IP offices are considered to be self-sustainable and able to generate revenue by licensing, sub-licensing and cross-licensing IP assets owned by the organizations. This provides them with a continuous stream of revenue for managing the operations of IP offices for self-sustainability or at least partial self-sustainability. Thus, there is a paradigm shift from original models of IP offices, where these were assigned with the responsibility of piling up IP assets rather than performing due diligence to differentiate between relevant and non-relevant IP assets.

Evaluation of IP assets based on their importance to overall organizational strategy and product lines resulted cost saving and further opened a window for revenue generation by commercializing IP assets that weren’t important to overall organizational strategy. Besides, a large portfolio also required a large amount of money in form of maintenance fee. As organizations became aware of the money apportioned for the maintenance fee of the IP portfolio with virtually no return on investment, they started performing due diligence on the IP assets to understand the landscape of the IP portfolio for which they were paying a large maintenance fee. Many models were developed to ascertain the quality of IP assets and to introspect between valuable assets and those that can be disposed of by either licensing them or by an outright sale. This resulted in a tremendous boost to technology transfer, which is evident from the fact that most of the multi-national organizations had an IP licensing office for IP commercialization.

The concept of technology transfer gained further prominence after more and more organizations started disposing off their under-utilized patent portfolios. The most popular technology transfer strategy was adopting either an offensive or a proactive strategy of value addition.

In the case of offensive strategies, the patent owner identifies a potential infringer to their patented technologies and forced them to acquire the license for these technologies by threatening them with infringement cases. In the case of proactive strategies, the patent owner tries to understand how a particular technology could be instrumental in adding value to a product and showing the incremental value of technology to a product/organization.

For example, in a hypothetical scenario, a patented technology related to an anti-skid braking system for aircrafts might be sold to a car manufacturer by modifying the technology to work for cars. This is just one example, of how adoption and adaption of technology is a key to transfer of technology. Such adoption and adaption might result in altogether new technologies that might be useful and even patentable thereby creating new IP assets. Creation of new IP assets is always a challenge as there is always a difference in opinion as to who will own the IP related to the new invention –a variation of the old invention already patented; an issue with collaboration and joint ventures.

Another important aspect in the transfer of patented technologies is technology complexity. A technology that is complex and difficult to reproduce without considerable effort would be in-sourced from the technology owner. For this reason, such technology will become more expensive and substantial investment would have to be made to train staff, buy new equipment and machinery, and obtain other resources. In some instances, the technology provider might enforce certain restriction on the type, make, and performance parameters of the technologies to guarantee its functioning as per expectation. This is essentially an issue between the provider and importer of technology. The technology importer feels that an additional cost has been inflicted on them for no good reason as the specification of the equipment certified by the technology provider is more expensive than similar equipment provided by other vendors. Sometimes, this may create distrust between engaging parties making technology transfer more complex. Additionally, this issue becomes more prominent when the importer of the technology is forced to purchase equipment’s from the technology provider at a substantial higher price.

Often overlooked in the initial stages of technology transfer is the business and market perspective of the technology. This is specifically true in the case of complex technologies where state of art high end technology is to be imported. When technology transfer is related to high end technology utilization in a niche market and subjected to strict provisions of technology transfer agreement, the management of the ‘technology’ aspect becomes more prominent. The return on investment becomes important compared to cost of the acquired technology. In such circumstances, the technology transfer fails to work as the payback time for investment becomes large.

Standards associated with product or services applicable for specific technologies can act as a major barrier in technology transfer. Industry needs to comply with standards, and standards play an important role in bringing products to market and even in government procurements. A product that complies with an international standard might still fail to comply with the local standards depending upon the technological diffusion and level of standards prevalent in the country. Transfer of technologies between countries need to specifically look into these issues.

In summary, technology transfer is a complex process involving multiple variables including technology, taxation, commercial exploitation, and legal intervention. Therefore, it needs to be carefully examined and advice on technology transfer should consider all these aspects. Proper due diligence on all aspects would result in the successful transfer of technology, diffusion of new technologies and greater collaboration between organizations, regions and countries. Successful cases of technology transfer will also facilitate trade and commerce whereas failed transactions will act as barriers to any further activity in this direction.


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